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Facts
The assessee filed appeals against penalties levied under Section 271(1)(c) for AYs 2012-13 and 2016-17, which stemmed from search assessments under Section 153A and were sustained by the CIT(A). A Coordinate Bench of the Tribunal had previously declared the underlying quantum search assessments illegal and bad in law due to mechanical approval under Section 153D.
Held
The Tribunal ruled that since the basis for the penalties, i.e., the quantum additions from the search assessments, had been declared illegal and effectively deleted by the Coordinate Bench, the penalties for concealment of income could not survive. Consequently, the Tribunal cancelled the penalties for both assessment years and set aside the CIT(A)'s order.
Key Issues
Whether penalties for concealment of income under Section 271(1)(c) can be sustained when the underlying quantum additions have been declared illegal and bad in law by the Tribunal.
Sections Cited
Section 271(1)(c), Section 153A, Section 153D, Section 132, Section 154, Section 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘B’: NEW DELHI
Before: MS. MADHUMITA ROY & SHRI AVDHESH KUMAR MISHRA
ORDER PER AVDHESH KUMAR MISHRA, AM: Since the issue involved in these two appeals is identical; hence, these are being heard together and are being disposed off by way of common order for the sake of brevity.
These appeals filed by the assessee for the Assessment Years (In short, the ‘AY’) 2012-13 and 2016-17 are directed against the orders dated 29.08.2023 passed by the Commissioner of Income Tax (Appeals)-24, New Delhi [In Short ‘the CIT(A)’].
ITA No. 2576-2577/Del/2023 Gurvinder Singh Duggal 3. Following grounds have been raised by the appellant/assessee : - “1. That On the facts and circumstances of the case, the order passed by the learned CIT(A) under section 250 of the Act is bad both in the eyes of law and on facts.
2. That the Ld. CIT(A) has erred on facts and in law in not appreciating the fact that the initiation of penalty proceeding is illegal and bad in law.
3. That the Ld. CIT(A) has erred on facts and in law in not appreciating the fact that the imposition of penalty proceeding is illegal and bad in law.
4. That the impugned CIT(A) order is arbitrary, illegal, bad in law and in violation of rudimentary principles of contemporary jurisprudence.
5. That the Ld. CIT(A) has erred on facts and in law in sustaining the penalty imposed of Rs 41,51,717/- u/s 271(1)(C) which is illegal and bad in law.
6. The appellant craves leave to add, amend or alter any of the grounds of appeal before/at the time of hearing.” A.Y. 2016-17 “1. That on the facts and circumstances of the case, the order passed by the learned CIT(A) under section 250 of the Act is bad both in the eyes of law and on facts.
2. That the Ld. CIT(A) has erred on facts and in law in not appreciating the fact that the initiation of penalty proceeding is illegal and bad in law.
3. That the ld. CIT(A) has erred on facts and in law in not appreciating the fact that the imposition of penalty proceeding is illegal and bad in law.
4. That the impugned CIT(A) order is arbitrary, illegal, bad in law and in violation of rudimentary principles of contemporary jurisprudence.
5. That the Ld. CIT(A) has erred on facts and in law in sustaining the penalty imposed of Rs 51,01,899/- u/s 271(1)(C) which is illegal and bad in law.
6. The appellant craves leave to add, amend or alter any of the grounds of appeal before/at the time of hearing.”
4. The facts of these two appeals are that the appellant/assessee was searched under section 132 of the Income Tax Act, 1961 (In Gurvinder Singh Duggal short,the ‘Act’) on 03.01.2018. Various incriminating material/documents were seized. The search assessments of the relevant years; i.e. 2012-13 and 2016-17 were completed under section 153A of the Act as per details given hereunder:- AY Order passed Order dated Additions Assessed u/s made income 2012-13 153A 31.12.2019 18,22,000/- 35,52,550/- 2016-17 153A 31.12.2019 2,23,59,360/- 2,39,75,790/- 3.1 Later on, the search assessment orders were revised/rectified vide orders passed under section 154 of the Act as under :- AY Order passed Order dated Additions Assessed u/s made income 2012-13 154 23.12.2020 1,40,36,524/- 1,57,67,074/- 2016-17 154 17.07.2020 2,17,45,000/- 2,34,61,430/- 3.2 The quantum appeals for these years were partly allowed by the CIT(A) vide orders dated 25.06.2021, 29.06.2021 & 30.06.2021. The appellant/assessee challenged these appellate orders (quantum appeals) dated 25.06.2021, 29.06.2021 & 30.06.2021 of the CIT(A) for AYs 2012-13, 2016-17, 2017-18 & 2018-19 before the Tribunal and succeeded.
3.3 Meanwhile, on incomes sustained by the CIT(A), the AO levied concealment penalties of Rs.41,51,717/- and Rs.51,01,899/-vide orders dated 23.03.2023 passed under section 271(1)(c) of the Act in AYs 2012-13 and 2016-17 respectively. Aggrieved, the appellant/assessee filed appeals, against the penalty orders, before the Gurvinder Singh Duggal CIT(A), which were dismissed. Hence, these appeals are before the Tribunal.
At the outset, the Ld. Counsel submitted that the assessment orders had been held illegal and bad in law. The quantum appeals (the above-mentioned appellate orders against assessment orders) of these years were decided by the Coordinate Bench of the Tribunal, in ITA No. 860 and 861/Del/2021, vide consolidated order dated 06/06/2024 for four years in ITA No. 860 to 863/Del/2021as under:- “20. In view of the aforesaid observations and respectfully following the judicial precedent relied upon hereinabove, we have no hesitation in holding that the approval u/s 153D of the Act has been granted by the ld. JCIT in the instant case before us in a mechanical manner without due application of mind, thereby making the approval proceedings by a high- ranking authority, an empty ritual. Such an approval has neither been mandated by the provisions of the Act nor endorsed by the decisions of the Hon'ble Orissa High Court; Hon'ble Allahabad High Court and Hon'ble Jurisdictional High Court (Delhi High Court) referred to supra. Hence, we find lot of force in the arguments advanced by the Ld. AR in support of the additional grounds raised for all assessment years under consideration before us. Accordingly, the Additional Grounds raised by the assessee for all the assessment years under consideration are hereby allowed.
Since, pursuant to the allowing of the additional grounds, the entire search assessment framed in the hands of the assessee is to be declared illegal and bad in law, the other legal grounds and grounds on merits raised by the assessee for various assessment years need not be gone into as adjudication of the same would be merely academic in nature and, hence, they are left open.”
In view the above-mentioned order of the Coordinate Bench, the Ld. Counsel prayed for setting aside the impugned order of the CIT(A) and deletion of penalties. To which the Ld. AR appeared in agreement. -2577/Del/2023 Gurvinder Singh Duggal 6. We have heard both the parties and perused the records. We find force in the argument of the Ld. Counsel that when the quantum additions are deleted the concealment penalties levied under section 271(1)(c) of the Act for the said quantum cannot survive. Therefore, in view of the above, we hereby cancel the penalties of both years and set aside the order of the CIT(A). Accordingly, both appeals of the assessee stand allowed. Order pronounced in open Court on 06 August, 2024.